Last Updated on August 28, 2021 at 7:57 am
In this edition of the reader audit, we meet a 39-year old unmarried male working in the private sector. He explains how he plans to achieve financial independence, quit his job and move to his native place.
I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. This is the 17th such reader audit. Previous editions are linked at the bottom of this article. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They will be published anonymously (such as this one) if you so desire. Please note: We welcome such articles from young earners who have just started their investing journey (see, for example, audits by Suhas and Avadhoot linked below).
My parents are dependent on me. I graduated as a computer engineer in 2003. After that, I managed to get a job in a small company. I was earning a low salary of Rs. 4K but started saving money thanks to frugal family values.
After a couple of years, I switched to a better-paying job and increased my savings further. I did not know much about saving instruments, and most of it was in my savings account. In 2006, I got an onsite opportunity for few months and managed to save a good amount. I may have saved about 75% of the allowance I got at the time.
In 2007-2008, my LIC agent then sold me some mutual funds, and I was unaware of what they were. After a few months, there was a market crash, and I saw the loss they had.
I was lucky enough to be patient and let the mutual funds remain without redeeming them. Many of them doubled the amount when I redeemed them after 7-8 years.
In 2010, I had saved a decent amount and bought a small apartment. I paid 50% from my savings and took a 50% home loan. I got some more months of onsite opportunities and prepaid the loan after 5-6 years.
During that time, I also got interested in personal finance and financial independence. I found websites like Money Mustache and Early Retirement Extreme.
I joined Asan Ideas for Wealth in 2015 and learned more about personal finance. I learned more about mutual funds and how I could use them. I read books like “Bogleheads guide to investing”.
I invested in the typical 60:40 equity/debt. I used just one mutual fund for equity and one for debt. At the time, freefincal published a turnkey solution using Quantum FoF, and I used that for the equity portion. I used HDFC Short Term Debt Fund for the debt portion. I used one ELSS, but that was just for tax-saving purposes.
My salary kept increasing every few years, and I saved 50-75% of my income. I kept investing whatever I was saving in the equity and debt funds.
In the past few years, I have switched to investing in the Nifty/Nifty50 index funds for new investments in the equity portion. Continue using HDFC Short Term Debt fund for debt portion. I rebalance every year depending on the planned asset allocation.
I’ve taken the Goal-based investing course and started following it a few months back. The only goal I have is reaching financial independence and relocating to my native place. There are smaller goals like travel for parents, but I can take care of those with my income.
Since 2016 I’ve been working on a side-hustle, which makes more income than my full-time job. I’ve also joined the “Earn From Skills” training and plan to build a brand with this side-hustle eventually. Editor’s note: I have requested the author to explain this in a separate article.
The years of saving and investing have paid off, and even though it’s notional, the portfolio has reached 33x annual expenses as of this time. The goal would be to reach 45x annual expenses to consider myself financially independent. But I have no plans to retire and will continue working on my side-hustle probably for life.
I have created an emergency fund that is 6 months worth of expenses, kept in bank FDs. I have medical insurance of 5 lakhs and another 5 lakhs corporate insurance.
I have term insurance of 15 lakhs. And corporate insurance of 50 lakhs.
Next financial steps:
- Create a medical emergency fund as my parents are senior citizens and find it difficult to get medical insurance.
- Get super top-up insurance,
- Stop the term insurance and the ULIPs.
- Consider quitting my job and moving to my native place. Sell my apartment and buy a house there.
- Hire a fee-only financial planner to set up a plan on managing the finances after the move.
- Spend full-time working on the side-hustle and increase income to 3x current salary. Build a brand for this over the years.
Similar audits by other readers
As regular readers may know, we publish a personal financial audit each December – this is the 2020 edition: How my retirement portfolio performed in 2020. We asked regular readers to share how they review their investments and track financial goals.
- First audit: How Suhas tracks his MF investments and reviews financial goals.
- Second audit: How Avadhoot Joshi evaluates his investment portfolio.
- Third audit: How a single mom is on track to financial freedom
- Fourth audit: How Gowtham started goal-based investing & took control of his money
- Fifth audit: Why my financial independence & early retirement plans were postponed by four years
- Sixth audit: How Abhisek funded his marriage & is on track to financial freedom.
- Seventh audit: How Rohit’s early struggles defined his investment journey
- Eighth audit: Why my investments are still on track despite job loss and lower-income
- Ninth audit: How a retirement planning calculation scared me to take action
- Tenth audit: I made several investment mistakes but have turned my life around.
- Eleventh audit: My net worth doubled in the last financial year thanks to patient investing!
- Twelveth audit: My financial journey: from novice to goal-based investor.
- Thirteenth audit: My journey: from a negative net worth to goal-based investing.
- Fourteenth audit: From Fixed Deposits to Goal-based investing in MFs.
- Fifteenth audit: My 10-year financial journey – mistakes made and lessons learnt.
- Sixteenth audit (part 1): How I achieved financial independence without mutual funds or stocks.
- Sixteenth audit (part 2): Lessons from my financial independence journey and future investment plans.
These published audits have had a compounding effect on readers. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They could be published anonymously if you so desire.
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Dr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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